After Fed Chairman Jerome Powell's comments, major stock indexes and cryptocurrencies plunged, with the Dow Jones Industrial Average dropping 1,100 points and Bitcoin falling 5%. Meme coins have fallen significantly, with Dogwifat, Pepe, and Bonk down 13% to 16%, while Pudsey Penguin is up 23%. Chairman Jerome Powell has signaled a cautious approach, saying the rate cuts will be tapered as we head into 2025, prompting mixed reactions in various markets. Despite discussions of potential Bitcoin strategic preparations, Powell emphasized that the Fed does not have the authority to own Bitcoin and is not seeking legal changes.
Cryptocurrency and stock markets tumbled following comments from US Federal Reserve Chairman Jerome Powell on Wednesday.
The Dow Jones Industrial Average fell 1,100 points, the S&P 500 fell nearly 3% and the Nasdaq Composite Index fell more than 3.5%. Meanwhile, Bitcoin fell by 5%, Ethereum and Solana fell by up to 7%, and XRP fell. 10%.
Top 10 cryptocurrencies by market capitalization, source: CoinMarketCap
In fact, most cryptocurrencies are in the red, with meme coins like Dogwifhat (-16%), Pepe (-14%), and Bonk (-13%) taking the biggest hit. The only tokens that are currently rising are Pudgy Penguins (+23%) and Bitget tokens (+7%).
Fed changes stance to “more accommodative'' in 2025
As expected, the Fed cut rates by another 25 basis points, but it was Powell's comments about 2025 that delighted bond markets and disappointed others.
With inflation remaining high, the Fed will likely cut interest rates only twice in 2025.
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“I wouldn't be surprised if the Fed reduces the number of rate cuts expected in 2025,” said Jack McIntyre, portfolio manager at Brandywine Global, according to Market Insider.
U.S. consumer inflation rose to 2.7% from 2.6%, prompting Powell to say the Fed “may become more cautious as we consider further adjustments.”
We have cut policy rates fully from their peak and the policy stance is now much more relaxed.
Jerome Powell Chairman of the Board of Governors of the US Federal Reserve System
Powell: 'Owning Bitcoin is not allowed'
But it was Powell's additional remarks about potential Bitcoin reserves that really caught attention in the crypto world. Powell said the U.S. central bank does not have the authority to store or hold Bitcoin, adding that the Fed is “not seeking to change the law.”
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The statement came after an Axios reporter asked the chairman whether he thought holding Bitcoin and building reserves was worthwhile for the United States.
We are not allowed to own Bitcoin. The Federal Reserve Act dictates what we can own, and we're not asking for a change in the law. That's something Congress should consider, but we're not asking for changes to the Fed's laws.
Jerome Powell Chairman of the Board of Governors of the US Federal Reserve System
Sen. Cynthia Lummis introduced the Strategic Reserve Act in response to President Donald Trump's announcement that the federal government would own Bitcoin, but not everyone agrees it's a good idea. .
Experts say Asia and the Middle East will be the first to prepare for Bitcoin
Former New York Fed President Bill Dudley said in a Bloomberg op-ed that this was a bad idea.
But what is it all about for governments or for people who don't own Bitcoin? Nothing good. Since there is no exit strategy, the objective will be to drive prices up, not create value for governments who will be left holding volatile tokens that do not generate income.
Bill Dudley, former New York Fed President
Some believe the market is overreacting to potential Bitcoin reserves. Zach Pandle, head of research at Grayscale, told The Block that investors are “valuing the theoretical potential of strategic Bitcoin reserves,” as evidenced by the price drop after Powell's comments. It may be too much.”
Related: Bitwise predicts 2025 Ethereum boom due to wave of RWA tokenization
Pandl added that Grayscale expects Bitcoin to be adopted in other markets first.
Grayscale Research expects more nations to adopt Bitcoin, but the next step could be sovereign wealth funds in Asia and the Middle East, which already manage highly diversified asset pools. It's probably very sexual.
Zach Pandle, Grayscale
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